Queensland Resorts Sell at a Discount as Aussie Clips Tourism

Club Med closed Lindeman Island resort -- the first island resort built in the Whitsundays -- on Jan. 31, after failing to find investors to help fund its original plan to make it more upscale, Brisbane-based spokeswoman Cynthia Dammerer said. Source: Club Mediterranee SA via Bloomberg

March 20 (Bloomberg) -- Luxury resorts along Queensland’s
coast, a destination for Great Barrier Reef visitors, are
selling at a fraction of peak prices as a rising Australian
dollar sends domestic vacationers overseas and hampers a
recovery from last year’s hurricanes.

Properties on Dunk and Bedarra islands changed hands late
last year for about 15 percent and 20 percent of their 2007
values. Club Mediterranee SA’s Lindeman Island resort is on the
market with an asking price of about A$10 million ($10.5
million), a 10th of what the French company spent to buy and
expand it in the early 1990s.

For-sale advertisements of hospitality properties in
receivership jumped 47 percent to 85 in 2011, according to real
estate company Colliers International. The decline in tourism to
tropical North Queensland has led banks to push indebted resorts
to declare insolvency or force them to sell, sending values to
the lowest levels since 2000, said Wayne Bunz, senior director
for hotels at property broker CBRE Group Inc.

“The sales are starting to gain momentum,” said Bunz, who
is based in Brisbane and has handled the Dunk, Bedarra and
Lindeman island deals.

Queensland’s tourism industry has been rocked by damage
from Tropical Cyclones Anthony and Yasi last year, an Australian
dollar near a record high, the rise of competing markets in Asia
and aging properties in need of upgrades, Bunz said.

Cutting Losses

The storms, which hit the state’s north in January and
February 2011, shut resorts in some of Australia’s most iconic
tourist destinations and kept visitors away from even those that
were unharmed. Damages and loss of visitors cost the state’s
industry about A$400 million, Queensland’s Treasurer Andrew
Fraser said in June.

After waiting in vain for a recovery in prices, the
resorts’ lenders are now cutting their losses and turning the
properties over to receivers, said David Sinn, a Melbourne-based
commercial real estate partner at law firm Freehills. In
Australia, receivers are appointed by secured creditors when the
borrower can’t repay their loans, to sell assets to help pay
back the debt owed.

“There’s a lot of pressure on banks now to realize some of
the real estate, especially leisure assets, and put the money
back into the general banking pool, so they can then lend it
out,” Sinn said. “You can only wait so long.”

Bank Loans

Loans by Australia’s four biggest banks to the commercial
property industry, which includes hotels, account for 10 percent
of lending, the International Monetary Fund said in a report in
January. Luci Ellis, the Reserve Bank of Australia’s head of
financial stability, said in a February speech that bank
holdings of commercial real estate were a bigger threat to
financial stability than the slumping housing market.

Far North Queensland’s leisure destinations are also seeing
the negative impact of the nation’s two-speed economy, in which
the mining industry is booming as manufacturing and tourism
struggle, said Judy Hill, Brisbane-based accommodation division
manager at the Queensland Hotels Association.

The number of visitors for both leisure and business to
tropical north Queensland fell 7 percent in the year ended June
30, 2011, compared with a 9.2 percent rise in central Queensland
-- which includes mining towns Moranbah, Gladstone and Emerald -
- and a 16 percent jump in Brisbane, according to a January CBRE
report.

The increase was fueled partly by airlines such as Jetstar
Airways Pty and AirAsia BHD offering cheap flights to places
such as Bali and Fiji, and Asian resorts offering comparable or
lower rates to their Australian counterparts, Hill said.

‘Fantastic Deals’

One-way flights in May from Sydney to Nadi, Fiji, and from
Sydney to Cairns on Jetstar both cost A$149, according to the
carrier’s website. Group deal website iKoala.com.au offers seven
nights for two at a beachfront resort in Nusa Dua, Bali, for
A$199; a similar deal at Magnetic Island near the Great Barrier
Reef costs A$299.

“There are some fantastic deals to resorts overseas, so
people are taking advantage of an international holiday,” Hill
said. “Because of what’s happening in the world, the average
Australian is trying to save a bit more. And I don’t see the
Australian dollar changing much in the next year.”

The Australian dollar reached $1.1081 on July 27, the
highest level since it was freely floated in 1983, and traded
around $1.0600 in Sydney yesterday.

Australia had about 5.9 million visitors in 2011, the same
number as in 2010, according to government data. That compared
with 7.8 million Australians traveling overseas in 2011, up from
7.1 million the previous year.

Fiji Favored

The average daily rate of hotel rooms in Port Douglas and
Palm Cove in north Queensland fell more than 10 percent in 2011
and has dropped 8.9 percent this year, according to figures from
hotel industry researcher STR Global.

Paula Westwood weighed up a vacation on a beach resort in
Australia against one overseas when she was planning her 40th
birthday celebrations last July. The clinical nurse specialist
at Calvary Community Healthcare in Sydney settled on Yanuca
Island in Fiji over her other options in Queensland, including
resorts in the world-famous Great Barrier Reef.

“We didn’t go down the Queensland route because there was
so much on offer in Fiji with a lot more variety, and more
bargaining to be done,” the mother of two said. “The cost was
definitely a big consideration. You might be looking for six
months for a special to come on with Queensland. We didn’t see
the Queensland resorts being pushed as hard.”

First Resorts

The first tourist resorts in the Great Barrier Reef, the
world’s largest coral reef system, were built in the 1930s,
according to the greatbarrierreef.org website.

The tourism industry there took off in the mid-1980s with
the construction of the Cairns international airport in 1984,
said Stevie King, a spokeswoman for Tourism Tropical North
Queensland. Investment in tourism accommodations increased over
the next five years, with the building of hotels including
Sheraton Mirage Port Douglas resort and the Hilton Cairns hotel.

The region now has 12,500 rooms, ranging from five-star to
caravan and camping sites and earns A$2.2 billion from 2 million
visitors annually, according to TTNQ data.

Dunk Island, a granite slab in the Great Barrier Reef, has
a resort with 160 rooms and waterfront suites. It began with one
bungalow in 1934 and was last refurbished in 2006 following
Tropical Cyclone Larry.

The first iteration of the resort on Bedarra Island was
built in 1957, and its 16 beach and hillside villas were also
last refurbished in 2006.

Resort Closures

Both closed permanently last July after initially shutting
for repairs after Cyclone Yasi. Mark Campbell, chief executive
officer of Hideaway Resorts, said then the extent of the damage
and further bad weather made refurbishment difficult, even with
insurance, and subsequently put both resorts up for sale.

Hideaway agreed to sell Bedarra to Queensland-based
Charlton Hotel Group for about A$5 million in November. That was
followed by the sale of Dunk Island to Brisbane-based Linc
Energy Ltd.’s Chief Executive Officer Peter Bond for A$7.5
million in December, CBRE’s Bunz said.

Sydney-based property trust GPT Group, which sold the
islands to Hideaway in 2009, valued Dunk at A$51.8 million and
Bedarra at A$24.8 million as of December 2007.

Bond plans to make the island a private getaway for his
family, the Australian Financial Review quoted him as saying on
Dec. 2. He declined to comment for this article.

Club Med

Club Med closed Lindeman Island resort -- the first island
resort built in the Whitsundays -- on Jan. 31, after failing to
find investors to help fund its original plan to make it more
upscale, Gold Coast-based spokeswoman Cynthia Dammerer said. The
French company paid A$15 million for the resort in 1990, the
Australian Financial Review said on Dec. 1. It spent A$85
million to expand it to 225 rooms, according to “The Whitsunday
Islands: An Historical Dictionary” by Ray Blackwood.

CBRE has received more than 200 inquiries about the resort,
and expects to complete a sale by the end of March, Bunz said.

Other Queensland resorts up for sale include Juniper
Development Group’s Sea Temple Golf and Country Club in Port
Douglas, an 18-hole course with a five-star resort and spa,
along with its adjoining luxury housing estate, with a price tag
of about A$12 million, being handled by CBRE.

Resort Corp.’s vacant oceanfront land in Townsville is
being marketed by Colliers on behalf of receivers Ferrier
Hodgson; and the Paradise Bay eco resort in the Whitsundays,
with 10 private waterfront bungalows, is for sale by PRD
Nationwide.

Ramada Resort

The listings follow the sales of the 194-room Mercure Port
Douglas Treetops Resort to Wyndham Worldwide Corp. in August,
which has renamed it Ramada Resort Port Douglas; the Sheraton
Mirage resort to Melbourne investor David Marriner last April
for A$35 million; and Orpheus Island in the Great Barrier Reef,
a year ago to Computershare Ltd. Chairman Chris Morris for about
A$6.25 million.

“The market was hurting last year,” said Paul Fraser, an
agent in Jones Lang LaSalle’s hotels division in Brisbane.
“There are astute buyers out there, looking at hotels and
resorts. They’re saying this is the time to buy, this is the
time when we need to get in on the ground floor again for the
next cycle.”